Peer lending is another innovative way of addressing economic development. In one case, BDC provided $40,000 to establish a loan fund, which is administered and promoted by North Central Community Futures Development Corporation. The key to success for this type of lending is to keep it simple.
How it works:
- A lending concept based on the principle of group borrowing, loans vary between $500 and $1,500
- If one person defaults, the entire group is penalized
- Money borrowed to purchase raw materials like beads, sewing machines and other material required to produce the crafts
- On average, a 10% holdback is implemented and the money is pooled so that if any of the group members delinquent, holdbacks can cover the loan payments
- Monthly meetings are suggested and facilitated by North Central Community Futures Development Corporation. Payments are made during the meetings and any delinquency problems are discussed
Initially, these programs started out as social occasions, but they quickly evolved into brainstorming sessions to discuss ways of selling the products at arts-and-crafts shows. One interesting concept that came from these meetings was that of thinking of how to involve young people in the community.
A success story:
Peer Lending Circle in Split Lake provided two groups of Elders in the community access to capital in order to purchase materials for their businesses. In a couple of cases, Elders purchased equipment to produce traditional crafts, such as outfits and moccasins. The loans varied from $500 to $1,500.
Key to their success
- Monthly meeting facilitated by the North Central Community Futures Development Corporation
- Open communication – ensure payments are made and delinquency issues discussed